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INTERNATIONAL
ARBITRATION REPORT
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"The Massachusetts regulations were designed," the state added, "to 'provide the
custo mer wi th a meaningful choi ce prior to ma~ifig a decision to sign the agreement (Mass .
Reg. No. 593 [Oct. 14, 1988),' in market cltc:Umstances in which the customer 's choice has
bee n sharply restricted. Thus, the Massachusetts regulations are faithful to the federal policy
fnvo ring consensual arb itration."
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Cou nsel for the State of-Massachusetts are state attorney general James M. Shannon
an d state assistant attorneys . general Thomas A. Barnico and Richa rd M. Brunell. Barnico
is the counsel of record
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Referring once aga in to Volt. Massachusetts said : "To ~he ' extent the Act was designed, in part, to promote arbitration, it was plainly intended 'to facilita te consensual arbi.
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trallo n."
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Steven W . Hansen, Gerald F. Rath, Victor H. Polk, Don E. Gorton III of Bingham,
Dana & Gould .re·p resent the Securities Industry Association .
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The U.S. District Court of Puerto Rico has ruled that under the Federal Arbitration
Act (FAA) a domestic transactio n covered by local antitrust law can still be referred to
arb itration. U.S . ··Judge Gilberto Gierbolini stayed the complaint of Cellular One of Puerto
Rico which alleged a breach of an exclusive distributor agreement between itself and Nokia Mobira, Inc. (GKG Caribe. Inc. d/b/a Microage and d/b/a Cellular One v. Nokia-Mobira. Inc.
Cellu lar World, Inc. 88-1774 GG; D. Puerto Rico; Text of Opinion in Section C).
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CASE ARBITRABLE, ANTITRUST LAWS DO NOT APPLY
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JUDGE:
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Judge Gierbolini said the antitrust laws of Puerto Rico ca nnot ba r arbitration. The
agreement between the parties allowed for disputes to be submitted to arbitration In accorda nce with the rules of the American Arbitration Association (AAA).
Citing American Safety Equ ipment Corp. v. J.P . Maguire & Co. (391 F.2d 821 [2d
Cir. 1968)) Cellular One claimed its complaint was a domestic antitrust matter which was not
subject to arbitration. The firm argued domestic antitrust matters must be handled differentl y
from , international agreements which are covered by federal an titrust laws . The court in
American Safety had' ruled that antitrust claims were not arbitrable.
United States
Page 1 of 7
It> COPYRIGHT 1989 MEALEY PUBUCAnONS. INC.
8
INTERNATIONAL
ARBITRATION REPORT
December 1989
American Sa fety Doctrine
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Judge Gierbolini disagreed with Cellular One. Citing Mitsubishi Motors v. Soler
Chrysler Plymouth. (473 U.S. 614 [1985» he said antitrust claims could be brought to
arbitration. "Finding it unnecessary, the Court (in Mitsubishi Motors) did not address the
legitimacy of the American Safe ty doctrine as applied to agreements to arbitrate from domestic
transactions. Legal developments occurring after the Second Circuit 's ruling of approximately twenty years ago have significantly eroded its vitality to the extent that the Supreme
Court, if confronted squarely with the issue of its con tinued applicability, would most certainly discard sa id doctrine."
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The doctrine of Ameri ca n Safety said private parties aid the government in the enforcement of antitrust laws by "means of the private action for treble damages." Contracts
which spawn antitrust issues may be "contracts of adhesion" which discourage "automatic
fo rum determination by contract," according to American Safetv. The doctrine also claims
antitrust issues are too complicated for the arbitral process and should not be left for arbi trators to decide.
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Judge Gierbolini said in Mitsubishi Motors the court reviewed the doctrine and
concluded that the "potential complexity of antitrust matters alone was not sufficient to ward
off arbitration."
Shearson/America n Express v. McMahon
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Turning to Shearson/American Express v. McMahon (482 U.S. 220 [1987]) Judge
Gierbolini said the U.S. Supreme Court concluded RICO claims and those brought under
Section 10(b) of the Securities Exchange Act of 1934; 15 U.S.c. Section 78j(b) were arbitrable. " It reaffirmed the holding of Mitsubishi to the effect that arbitral tribunals were
readily capable of dealing with the factual and legal complexities of an titrust claims; that
there was no reason to assume at the outset that arbitrators would not follow the law, and that
although 'judicial scrutiny of arbitration awards was limited, the same was sufficient to ensure
that arbitrators complied with the requirements of the statute."
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"Thus," he added, "the recent Supreme Court decisions point toward increased recognition of the federal policy favoring arbitration and away from the American Safety doctrine,
which we think - with all due deference - has become invalid."
Counsel for Nokia-Mobi ra is Pedro Santa-Sanchez of O'Neill & Borges; Carlos E.
Jimenez represents Cellular World and Ernesto Gonzalez Pinero is counsel for G KG Caribe,
[nco All of the attorneys are located in San Ju an, Puerto Rico.
United States
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Cl COPYRIGHT 1989 MEALEY PUBUCATIONS. INC.
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Itl T il E utUTED STATE S DI S TRICT COURT
f O R T il E DI STRICT Of' PUERTO RICO
n
C I VIl. NO
88- 111 4 GG
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GKG CARtBE,
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d \ b \ a HICROAG£ and
distributor
Pl ai nti tt
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QfINION AKO
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No kia-H o bira,
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in Puerto Ric o.
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a ny
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The a9re ~ment provided that at the opt i on o t Na kia-
dispute
ariSlmj
under
the
.a~.
cou ld
b.
su b llitted
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to
Ob
arbitrati o n in Fl or ida in a cco rdanc e with the rules o r t h e American
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Arb it r ati o n Ass oci ati on.
Plaintit! has tiled the present action seeking damage s as a
or
result o f a n alleged brea c h
The
in controversy.
Is
proc eedings 6tayed pending a rbitration.
exerc 15e
prov ision o !
of
Clause
that
co ntr~ ct ual ' o pti o n
its
XVI o! the
int o rmed
submitted
(Cellula r
plai nti !!
to
One).
that
a rbit rati on
all
ill
relevant
part
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has giVen n o tice
under
tho
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Or-
Relying
a rb itrati o n
a t.
on
this
provision,
pl ain t it.f's
c la1~9
No kia-Hobi ra
pursuant
to
moved
to
co.pe l
Se c ti o n
)
o C the
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arbitration
,.
Federal Arbitrati o n Act, 9 U.S . C. , ), and requested that the pre6e nt
distribut or
Uok ia-H o bira and phintit! GKG ear i be,
Cell ular One
It a ppears !rolD th e exhibits
~ o kla - H o bira
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the
~o t i o n
W
ot
in
At the opt i on of Noki a-H o bira, ho~eYer, whi c h .uet be
exercised 1n ~rit lng by registered or c ertiti ed mail ,
any dispute arisi ng hereunder ahall be eettled in
Florida betore the Aalari c a n Arbit rat ion Ass oci a t.ion
pursuant to the assoc iati o n rules then in ette c t a nd
the arbit ration a ward shall bee a.e binding o n the
parties.
In c . ( " o kla. - Ha bira) requesting that the c Olllplaint be dismissed o r the
atta c hed t o co -detendant's
prov ides
tallows :
1II0tlon t iled by co-defendant Nokia-H ab ira,
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Uo .... pending
provision
an exclu& i ve distri bu t o r agree ment.
Jur isdi ct i on invoked pu rsu ant to 28 U. S . C . §§ 13)1 , 1])2 and 1)] 7 is
no t
arbitrat ion
agreement exec uted by
a c tion
be
dindssed
or
that
th~se
proceedings
be
stay e d
pending
Inc . d \ b \ a Ki croago and d \ b \ a
a r bitration .
The appearing co-defendant has al so
cla ills
a ssorted
a cco rdance
",ith
against
the
it
t erms
lIlust
of
be
t he
The issue before us is whether we should enforce an
agre em en t ~
o
United States
s.nPage
10 g 3 of 7
t o arbitrate when it involves a domestic transa c tion covered by l oc al ~
antitrust
law whi c h
f o rec lose s
the
intended
arbitrati on.
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L.P.R.A .
il 218-218d (laW No. 75
ot June 23, 1918).
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fl o f'lda
co rporation f o r the e)Cc l us l ve d istr ibut i o n o f co-d eten d a nt 's p r odu c ts
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eo distributor agreement wi th co-defe nd ant
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88 - } 77 4 GG
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The Fede r a l Arbitration Act (the Ac t).
provides the star ting block tor our a nal ysis .
9 U.S . C.
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c..t R!L.
ae
Act:
establishes a
l ederal
pollcy
Hoses V' H. Cone Me mor ial Hos pital y . Hercyry
..hel .. lng e conollic p Olo/'er that ,",ou 1d pro'l l:je grounds ( o r the rev oc at.i on
tavo r !nq a rbitrat i on,
CQni try c tl ~~~.
46 0
o f any con tra c t, 9 U. S.C. , 2, Soyt hland Corp"
The Bremen y
Reynolds V ' By rd , 410 U.S. 211, , 221 (1 9 85).
4 60 U.S .
at
la .. establis h ing
agree ment to a rbit rate.
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a nd
a greements ,
and c reat.es a
regUlating
a t 25, n.12.
Faced with a request t o
co~pel
Hoses
H
body at
the dut y
Cone
fe deral
to hon o r
an
substantive
law
oC
a rbit.rabllity
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t ederal
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whether the parties a greed to arbitrote the. dis pute a nd app l y the
appl i c able
arbitration a gree.ent within the coverage a t the Ac t.
Keating,
Co ,
46 5 U.S.
]88 U. S.
)5lS,
Primo PAi n t CorD . y. f l ood
4 00- 4 0 4 (1967); Soutb lond Corp.
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any
That body a t law advises
that questions o t arbltrability must be a dd ress ed with
a healthy regard l or the l ederal po l icy Cavori ng
arbitration
The Arb ltrat.i o n Act establ i shes that,
a s a matter o C Cc cjera) )""' , anv doubt. concerning the
t he
agreolllents ,
tru s t
ent o rcement
O:b
<:::j
o!
a rbit rati on
clauses
in
:JJ' 0
internati on al
it c ontends the present c a •• involv es" d o mesti c . o ti -
laatter
whi c h
( 2 d Cir. 1963).
is
no t
su b ject
y
to
J. P
a rbitration
MA g uire.
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a ccording
rn~
to
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19 1 f . 2d 8 2 1
Sioce plaintiff's argum en te fail to persuade UB that
d o mestic Antitrust .atters requ i r e different treat.eot than Int.ernati on al Agree.ent. governed by federal antitrust laws, we disagree.
In Hitaubishi Motors y . SpIer Chry sler P l ymoyth, 4 11 U.S. 614
(1985) .
y
In c , n o U.S.
Although plainttfC co nc ed es that the Federal Arb it. r at.i on Ac t
co.pels
Mos es H. Co oe
W
Hem o rial Hosp itAl , 4 60 U. S . at 2 4 ;
to
::j~
4 01 U. S. I, 15 (1972), a gree.eot.
peon Hlttor Reynp ld;
Ame ri CAn S Afety Equipment Co rp
arbitrati on , we must determine
465 U.S. at 1 6, n . l1.
at 2 18 .
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Uosp iUl ,
arbitration
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HemoriAl
su bstantive
fav o ring
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policy
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to arbitrate .uat be enforced .
The above cited provision a nd th e Act aa 4 whole DaniCest a liberal
l ederal
hpAt; a te -S h o re
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Absent compelli ng cons iderat ions su c h as the sort of f raud or ov er -
U.S . I , 2. (1983 ) requiring that we vigor ou sly en l oree aqree.ent s t o
a rbltrat.e .
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Ho ses H . Cone Hemo rlal Hos pitAl , 46 0 U.S . at 2 4 - 25.
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A wr itt en provision in any .aritime tran s a cti on or a
co ntra c t evidencing a transaction involving commerc e
t o settle by arbitration a controve r sy . .. shall be
val id, irrev oc able, and enforceable, save upon such
gr ou nds as exist at law or in equ ity for the re voc ation
o f any c ontract.
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sco pe at arbitrable i ssues should be resolved 10 la vo r
arbitration, .. hethe r th e prob l em at hand i. the
construction ot the co ntra ct language Itse l t or an
allegation ol waive r , delay, or a like d e fen s e t o
arbitrability .
Specific all y, Section
2 DC the Act states in re levant part:
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the
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Arb itra ble pursuant
f ound
to
that
respondents'
the arbit.rati o n
a c t.
antit rus t.
claills
were
The Cou rt care full y
s c rutinized the Ame ri c on Sa Ce t y d oc trioe in the internatlon&! con text
and , Atter add res sing ea c h o f ita l our Ingred ients,
it n e verthe less
United States
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C I Y IL NO
88 - 17 7 .
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the
arbitrati on
IIg reelllent.
RegA rd 1 nq
t. he
ex c ept io n cont ained in Ameri c an Safety the Court n ote d that:
war and pea c e are too i.portant t o be vested
No twithstanding the a b senc e ot Any explicit support tor
su c h an excepti on in eithe r t h e S h enoan Ac t or the
Federal Arbitrati on Act, the Se cond Circu i t there
reas o ned that: tithe pervas i ve publi c interest in ent o r c em ent o t the antitrust lawa, And thu nature ot the
c laims tha t arise in 5uc h CAse s, comb ine t o make
antItrust clail'lls
in appropri ate t or arbitrati o n . "
II
H..1..UuJbishi
H2..t..2..r..:i.
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at:
U.S.
t o be lodged in arbitra tors c hosen trow the busine sll cOlUlunl ty
parti c ularly
.
e xperi en c e
tho
tra n sa c ti ons.
Circu it's
ruling
signifi c antly
Court,
it
Legal
wa s
to
developwents
issued
eroded
a rb itrate
occu rring
appr ox J.ately
its vitalit.y to the
con tro nted
a rising
squa re ly
with
trOD
atter
t.wenty
domestio
the
year&
Second
a go
ha v e
YO
agre e ments
LtG
continued
enfor c ement
oC
the
contra c ts
whi c h
generate
pivotal
an titnJet
private a ction t or treble da.agee;
2)
ant itrust
Ea c h
of
these
concerns
was
e conowic
of
requirements
the
role
lawa
in assisting
lIe ans
by
of
the
the strong possibility th at
issue.
ot
prone to com pli c at i on,
analysis,
a rbItral
written
and
there t o re
proce s8,
rationale,
no
by
the
In so d oi ng,
Cou rt
In
the Court
warrant invalidati on oC th e aele c ted forum a baent a showinq that tha
may
be
con tracts
A party could atta.pt
ot
or
overveening
bargaining
power;
~,
require sophisti c ated
are
il l-adapted
expedition,
sl.pll c lty .
resort
to Dake •
that
enforce.ent
wou ld
b.
unreasonable and unjuat; or that proce edinga in the co ntra c tual t oru.
wil l
be 80 Cjravely diffi cult and
party]
wUl
Inconvenie nt that (th. r •• l.tlnq
for all practical purposes be deprived ot hie day
ThO Bremen, .07 U.S . at 12, 15 ,
court .
18 .
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Abllent .u ch • • h o wlnCj
In the present c aee, there Is no b.ai. tor as.ual nq the Coru.
inadequate or its a.lection untain ·
and
hod
Ameri c Qn
reasoned that the .ere appearance o f an antitrust dlapu te did no t
))
legal
add rellsed
Hit subhh l Hoton a nd r ound t o be laCking.
as
strengths
hoa
s..u
S-At.Jlll, )91 F . ld at 826-827.
a d hesion militates against a utomat i c Corum detenination by co ntra c t;
a nt itrust i& sues,
thot
su ch 4& that the . qr a ement wall afte c ted by fraud , undue inCluence ,
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governmental
4.
co •• unity
showing that would juetify setting aside the forua-eela ction c la us e
of
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private part ies play
f orelqn
to o ur law and valuea .
issue
the
The Ame ri c an Safety doctrine incorporates the t ol 1 0wing t our
1)
a
arbitration clau.a waa tainted.
app l i c ability, would mo st c ertainly dis c ard said doctrine .
ingredie n ts:
f ro.
extent that the supreme
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tho lle
with or eXPQtl ure
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Court did not addre ss the legitimA CY o f the American s a Cety d oc trine
as
Ln the qeneralli,
decis i ons as t o an titrust regulation o f business a re t oo impor tant
Jt unneC85&ary.
t' lndlnq
6 29 .
co n cept s DC co . . o n sense a nd a'.ple equity ; a nd .) just a a issu es o f
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to
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proceeded
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Th. Court als o dete ra ined that the potential complexity ot
mini.al
antitrust aattera alone was not suf(i c lent to ward o tt arbitrati o n.
to
basi c
In
thi s
respe c t,
1t
wa s
noted
that
adaptabil i ty
and
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e xpertl»e are hallmarks a t arbitration, that the anti cipa ted subje c t
trane a c ti on e.
matter ot the dispute cou ld be taken int o account vhen appo inting the
torc e in the d omest ic cont ext .
arbitrators,
the
that Cormed the basia Cor the Ameri c an sa Cety ea.e in 1968 does not
propos iti o n th at a n
can t ara with the assess.ent o r arbitration whi c h has prevailed sinc e
that
a rbitral
rules
usually
It 018 0 rejected
provided
~t h.
a rbitration panel v iI I pose t oo great. damage o f
lor
innate hostility
Th e Court dec li ned t o i ndu l ge the presumpti o n
retain com petent, conscien ti ous and i mp a rt ial arbitra tors.
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at 6]4.
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ca pi~alis.
importanc e to
o C the reg i •• oC the a nt itru st la ws ."
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Ameri c an democ ratic
f und~menta l
re cog nized that the private c ause at a ct i on played
a vital r o l e in enCorc ing this regime .
The Court aCte r examining the
l eg i slatiVe I ntent behind Sec ti o n 4 at the C layt on Ac t.
dam~ge.
that the prima ry t unc ti o n a t the treble
emphasized
c a use a t a c ti o n
W4 S
It n ot ed that the pr05pe c tlve li tigant could provide
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co.p enaatory.
Hitllubhhl .
held
that
both
RI CO
chias
78j(b) were .ubje c t to arbitration .
holding at Hitaybl,bl
to the eUec t
that arbitratora would not t a ll ow t .he law. and that alth ough judi c ial
. c rutiny oC arbitrati o n awards was li.ited. the
to en8ur.
th at
arbitrat or' complied wi t h
a t atu t. • .
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the statute will cont i nu e to
s erv e both its remedi al
t unc ti on.
She~rson / A mer1can
Al though
the
holding
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A.l.i.g
and deterrent
Express
in
y.
Hit:5Ubishi
MCMahon.
waa
48 2
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at 637;
U.S .
220
to
~
(1987) .
international
in
U .S .
U . S.
the
at
506
Ho reov e r.
2]2.
(191 4 ) .
context
the
oC
.0.'
was auCri clen t
requlrement.1I
In Sc hor k y
the
Court
an
international
at
the
hl~ tl1l.=.
e.phasi zed
agreement wh i ch a180 apply in the present .ituation:
c a use o C a ct i on in th e arbitral Corum.
tribunal, wen
a t antitru.t c1ai •• ; that there wa5 no r.a.on to a.,u •• at the out5e t
hl~
that -ao long 4S the prospect ive litigant .ay vindicate ita statuto ry
19)4,
readily c apable at dealing with the Cactual and legal co.pIexltie.
cona lderati on5
It co nc luded
c !ai ••
It r.atClr.ed t h e
that arbitral
in ad v anc e Cor a mutually agreeab l e procedure whe reby he would seek
a nt it rust re covery and settle other con trovers ies.
and
brought under .ec tion lOeb ) at the Securiti •• Exch ang, Ac t a t
15 U.S .C. I
It then addressed the fina l concern which it cons idered the
core at the Amer i CAn sa fety d octrine, -the
upo n
KC
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heavily
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that the parties and arb it ra l bod y wou l d b. unable or unwilling to
Cl early, the .ietru.t at arbltr.tl o n
In shurgon / Aleri ce n Expresa. Il.UU:A . the SuprefDe Court relyi ng
N
473 U. S. at 63 4 .
that thl. r •• e o oing should a pply wi th e qual
O
then.
to the const raints o n bus i ness conduct that antitrust law imposes. "
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we tind
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and
parti c i pat i on ot experts .
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c ertain
a rbltClltlon
A contractual proviaion spec lCying in adv ance the t oc u.
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i n whi c h disputes shall be litigated a nd the law to be
applied Is '" an alao st indispensab le precondi ti o n t o
achleYement DC the orderliness a nd predictability
essential t o any international bus iness trans a ction . . .
A parochial recusal by the courts at one c oun try to
entorce an inte rnational arbitration ag r eement would
not o nly frustrate these purposes, but would inv i te
unseemly and lIentally destru c tive jockeying by the
parties to se cure ta c ti c al litigation advantages . . .
United States
Page 6 of 7
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88 171 .
GG
-g -
O
CIVIl , NO
[It WOUld) damage the fab ric ot international comme r ce
and trade , and Imperil the willingness and ability o f
busin ess
to
ente r
into
international
commerc ia l
agre ements .
the partiea a re inst ructed to int o ra the court It any turther matter.
and compe lled to seek its remedies be f ore the internati ona l arbitral
61.11,,[
selec tion cl ause) .
toward
inc rea&ed
arbitration and
(1988)
See als o St e .... art Org.
(0 dealership case
con siderati ons
In
the
con te x t
Iruu.
in IoIhi c h
or
a
the
t o[UDI-
YO
R
voiced
22
Thus, the re c ent Supreme court decisions point
recognition
away
trOD
ot
the
p o li c y
favodng
the American Safety d octri ne ,
whi c h we
f ederal
In
co n c lusi o n ,
we
tind
t hat
the
EW
think -- with all due d e lerenc e -- has become invali d.
FlI:deral
Arbitration
Ac t
.N
co.p els the enlorc ement ot the arbitration clause in the distribut or5h ip agreement exocuted by Noki a - Hob ira and Cellular One .
The
dictate a
di tte r ent
cOJllplaint
result. .
Thus,
all
W
antitrust 1010'5 ot the Coamonwealth a t PUerto Ri co can n o t
cl aias
W
(Jl
cour t
48 7 U . S .
a sserted
in
the
i nc luding the antitrust claims .u5t. be submi~ted to arbitration .
Wheret ore,
in
view
at
W
o.
Btecb Corp .•
the
toregoing,
co-detendant
San Juan , PUerto Ri co, this
KC
tribunal a s ag r eed up o n by the parties.
V
BO OaDEItED .
Albert o-Culv er Co . was required to honor Its bargain
17 ri- day
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rea ain t or dispositi o n in this t o ru •.
41 7 U.S. at 516-517.
Consequ ently .
- 10-
VE
N
TI
C IVI L HO. 88-177 4 GG
N
'nZ"
ot tfovelllber, 1989.
O
z
GILBERTO GIER80LIHI
U.S. District Judge
il-t
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Ho bira's .otion is hereby GRANTED and the prese nt proc eedings are
hereby Btayed pending arbitration .
Once arbitration has concluded,
United States
Page 7 of 7